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BenefitsLink Retirement Plans Newsletter
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Employee Benefits Jobs
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Webcasts and Conferences
COBRA Compliance Workshop
in Washington
on June 22, 2012
presented by U.S. Department of Labor, Employee Benefits Security Administration (EBSA)
COBRA and Affordable Care Act Compliance Workshop
in Idaho
on August 1, 2012
presented by U.S. Department of Labor, Employee Benefits Security Administration (EBSA)
Fiduciary Education, DOL & IRS Correction Programs, and Health Laws including the Affordable Care Act Workshop
in Florida
on August 8, 2012
presented by U.S. Department of Labor, Employee Benefits Security Administration (EBSA)
Davis Bacon Plans
Nationwide
on September 12, 2012
presented by McKay Hochman Co., Inc.
Qualified Plan Essentials Plus Series
Nationwide
on August 14, 2012
presented by McKay Hochman Co., Inc.
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Advance Your Career with ASPPA’s Fall Certificates & Credentials [Advert.]
Advance your career & retirement plan knowledge with ASPPA’s Fall exams! Get your TGPC,QPFC,QKA, QPA & CPC credential & earn Continuing Professional Education credits. Early registration ends September 14. Exams windows are from August 1-November 30.
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Junk Debt Saving Pensions and Hedge Funds?
"[C]redit hedge funds and pension funds that allocate capital to them come in. These funds 'lend' money to small and medium sized businesses starving for capital. ... They do this by investing in junk bonds or by lending directly to companies through asset based lending. It's a risky business but the best hedge funds all invest in these strategies. And it can be immensely profitable for hedge funds and their pension fund investors."
(Pension Pulse)
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'Bad Deal' Lump Pension Payouts for Veterans Draw New Scrutiny
"Lump sum pension payments for vets are big business, targeting 1.5 mil.lion former service members who receive $40 bil.lion annually. Companies that provide them have attracted negative attention from military advocates for years. Tales of retired or injured vets getting 30 to 40 cents on the dollar are easy to find. In 2004, Congress threatened legislation designed to banish the industry, and several courts have ruled the arrangements run afoul of existing federal laws.... But on Monday, Consumer Financial Protection Bureau Director Richard Cordray said his agency will begin focusing on pension lump sum payments."
(msnbc.com)
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Retirement Reality: Save 9% of Pay to Have Enough
"If you've spent your career at a large company that nudges you repeatedly to make the most out of your 401(k), you probably will retire some day with plenty of money. But if you are like most Americans, and work for companies that are less paternalistic, you probably are fending for yourself and failing to save enough. By the time you retire, there's a good chance that you won't have the money you need for golf greens fees, trips to see your family, or even an evening at Denny's. In fact, you might even wonder how you will pay the cable and electric bills."
(Chicago Tribune)
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403(b) Written Plan Failures and Examinations: Notes From IRS Phone Forum
"During an IRS phone forum, Sherri Edelman Tax Law Specialist, Employee Plans, Rulings and Agreements Technical Guidance and Quality Assurance, said the 403(b) prototype program is in the clearance process, which is a lengthy process to ensure the guidance issued is correct. While the IRS is glad employers are interested in the pre-approved plan program, Edelman says it should not be their primary focus. Sponsors should focus on compliance with Notice 2009-3 and that the plan's operation follows the written plan."
(PLANSPONSOR.com)
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Fourth Circuit Finds Elimination of Early Retirement Subsidy Barred Under Plan's Definition of Accrued Benefit
"The appellate court determined the plain, unambiguous language of the plan included the supplement in its definition of 'accrued benefit.' Thus, the benefits committee abused its discretion when it denied the benefits. The court cautions that its holding is based on the specific language of the employer's plan. Stand-alone, ancillary welfare benefits generally are not independently protected by ERISA. However, the drafters of a retirement plan may choose to define any benefits as accrued or vested, and thereby trigger ERISA's protections." [Savani v. Washington Safety Management Solutions, Inc., f/k/a Westinghouse Safety Management Solutions, LLC (4th Cir.)]
(Wolters Kluwer Law & Business / CCH)
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Guaran.teed Pension Returns Not Always Worth the Cost
"The minimum return guaran.tee, devised by financial engineers to allow pension providers to offer a handy hybrid between defined contribution and defined benefit schemes, is proving increasingly hard for pension fund managers to ignore. Interest in the concept has grown following the spectacularly negative returns triggered by the credit crunch. However, a new report from the Organisation for Economic Co-operation and Development warns that the notion of pledging a minimum floor for investment returns can be extremely costly for pension providers—and hence for the participants making pension contributions."
(Institutional Investor)
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Los Angeles Mayor Eyes Possible Referendum on Pension Reform
"Los Angeles Mayor Antonio Villaraigosa said on Thursday he was prepared to take public pension reform directly to voters next year after recent referendums approved cutting pensions in two of California's biggest cities. 'We're proposing it to the City Council. If they don't pass it, we're going to put it on the ballot,' [he said.] Villaraigosa, a Democrat, said he also wanted to raise the city's retirement age to 67 from 55.... cap maximum pensions at 75 percent of salary and reduce the cost-of-living adjustments on pensions."
(The New York Times; free registration required)
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PBGC Takes Over Dewey & LeBoeuf's Underfunded Pension Plans
"The U.S. government agency that guarantees workers' pensions took over Dewey & LeBoeuf LLP's underfunded pensions after a federal judge terminated the plans and appointed the Pension Benefit Guaranty Corp. as trustee. Judge Jesse M. Furman of the U.S. District Court in New York on Wednesday signed off on a consent order terminating the law firm's three pension plans, putting the pension regulator in charge."
(Reuters via FoxBusiness.com)
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Beware Playing 401(k) Catch-Up Close to Retirement
"According to the Bureau of Labor Statistics, the average period of joblessness has reached about 40 weeks, roughly three times the duration during the 2001 recession. As bad as that sounds, it's worse for people 55 and older. Their average unemployment duration has reached 56 weeks—19 weeks more than for people under 55. Among other things, that means a nasty hit to an older person's retirement plan at a point when he or she can least afford it."
(U.S. News & World Report)
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U.S. Public Pension Portfolios More Aggressive Than Private Plans or European Counterparts
"Many U.S. public pension plans have a propensity to imprudently invest their portfolios more aggressively than private plans or their Canadian and European peers with similar demographics. That's one of the findings documented in a study by an international trio of academics. That paper is potentially the most important research in the public pension arena this decade.... [T]he researchers found that state and local government public pension plans in the U.S. allocated higher percentages of their portfolios to risky assets as their plans' retirees/actives ratio increased, which is exactly opposite of what prudent fiduciaries would do if concerned solely for the interests of beneficiaries."
(Governing)
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Ma.le Boomers Plan to Work in Retirement, Not Plan for It
"Ma.le baby boomers are looking to employment for income during their retirement years, rather than planning ahead, according to survey by Insured Retirement Institute. The survey also indicated that ma.le boomers are less risk averse than females when it comes to choosing what to invest in. Of the ma.le boomers surveyed, 22.2% said that the rate of return was the most important feature that they considered when looking at investments, while 15.3% said past performance gave them the greatest indicator of whether to invest or not."
(Financial Planning)
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ERISA Advisory Council Roundup: Disability Benefits in DC Plans
"Witnesses pushed for defined contribution plans to incorporate qualified disability benefits June 12 at an ERISA Advisory Council meeting on the interaction between disability and security in retirement. Long-term disability leave can have a devastating impact on affected individuals' retirement savings, and qualified disability benefits in defined contribution plans can bridge that gap, they said."
(Bloomberg BNA)
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Amicus Brief of DOL Supporting Plan Participant on Obligations of Plan Fiduciaries as to Investment in Company Stock
Questions addressed by the DOL in this brief are: "1. Whether ... plan language mandating plan investment in employer stock - no matter how 'dire' the financial circumstances - relieved [the] plan fiduciaries of their statutory duties with regard to the selection and retention of [company] stock as an investment for the plan. 2. Whether ... the fiduciaries were entitled to a presumption that they acted prudently in retaining the employer stock as a plan investment ... because the plan participants failed to [show that the company's] viability was threatened and that the company's stock was in danger of becoming essentially worthless." [White v. Marshall & Ilsley Corporation, No. 11-2660 (7th Cir.)]
(U.S. Department of Labor)
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Amicus Brief of DOL Supporting Plan Participant on Status of Insur.ance Company as Plan Fiduciary and Its Obligations as to Investment Options
"The district court's opinion that the defendant did not act in a fiduciary capacity is in error because ... the defendant exercised broad discretion over the selection of mutual fund share classes. The opinion, if affirmed, would undermine ERISA's protection of plan assets by permitting an entity to assert broad discretionary authority over a plan's investments without being subject to ERISA's fiduciary obligations.... [Issue:] Whether an insur.ance company that manages a separate account for ERISA-covered plans is subject to ERISA's fiduciary obligations to the extent it retains unilateral authority to change the mutual funds initially approved by the plans and to pick among mutual fund share classes that have different expense ratios, including share classes that generate undisclosed revenue-sharing fees for the insur.ance company." [Leimkuehler v. American United Life Insur.ance Co., No. 12-1081 (7th Cir.)]
(U.S. Department of Labor)
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[Opinion]
Illinois Municipalities Struggle to Meet Spiraling Pension Costs
"A financial crisis is brewing in nearly every Illinois city, town and suburb as they lose ground in their effort to fully fund police officer and firefighter pensions. And who's on the hook for those billions of dollars? The taxpayers, of course. How did we get here? For years, Springfield lawmakers added sweeteners to police and fire pensions without providing an adequate funding mechanism or considering local government's ability to pay for them. As a result, obligations have soared while unfunded liabilities have widened."
(Chicago Sun-Times)
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[Opinion]
Did CalPERS Just Waste Half a Bil.lion Dollars?
"Five years and 500 mil.lion dollars. That's what it took the California Public Employees Retirement System to finally launch its new computer system 'my|CalPERS'.... In what planet is $500 mil.lion a reasonable amount of money for a pension fund to pay for a one-off computer system? ... [A different path] would see CalPERS use the money it spent on a software package to instead build a business that offers the same capabilities to other pension funds and thereby create a feature set that no one of the pension funds could have afforded to develop on their own. It might be risky, but so long as the lead pension fund client gets the data management facilities it needs at the end, does it matter?"
(Institutional Investor)
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Benefits in General; Executive Compensation
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[Official Guidance]
Beware This Threat to Executive Compensation Tax Deductions
"It is well known that the Patient Protection and Affordable Care Act ... significantly limits the ability of health-insur.ance companies to deduct payment of compensation beginning in 2013. What is not so well known is that the IRS might apply this limitation to health-care services providers that are not typically considered to be insur.ance companies, to captive insur.ance companies, and even to companies outside the health-insur.ance industry."
(CFO.com)
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Small Businesses Face Little Known Life Insur.ance Tax Trap
"Employers who carry key man insur.ance and other common forms of employer-owned life insur.ance need to watch out for a potentially costly trap.... [If] proper notice and consent forms aren't completed before the policy is issued, the death benefit is taxable, when it would normally be tax exempt."
(Forbes)
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Another Case in the Growing List of Recent Litigation Over Executive Compensation
"[D]espite the fact that Dodd-Frank Act Section 951 explicitly makes the Shareholder Say on Parachute Pay vote non-binding, the strike suit lawyers have been quick to file lawsuits against companies that have made these disclosures. For example, after Encore Bancshares, Inc. filed its proxy statement requesting that shareholders approve of its acquisition by Cadence Bancorp, LLC, Encore 'shareholders' quickly filed a class action against officers and directors of Encore alleging, among other things, that they breached their fiduciary duties due to the compensation payments that resulted from Encore's sale, and breached their fiduciary duty of disclosure in connection with the Shareholder Say on Parachute Pay disclosures. The litigation did not seek to derail the transaction, only to collect money from the officers and directors (or their insur.ance policy)."
(Winston & Strawn LLP)
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Qualified Support for Nonqualified Plans
"At a time when shareholders are voting down executive pay packages in droves ... financial experts have been advocating richer retirement benefits for the top brass.... [M]ost attention centers on nonqualified deferred compensation plans, in which executives squirrel away a portion of their salary above the maximum that qualifies for tax deferrals under federal 401(k) nondiscrimination rules. Historically ... companies have added matching contributions as high as 50 percent. Although no one seems to keep overall U.S. statistics, the accounts in the Prudential Retirement survey total about $13 bil.lion. However, these 'accounts' are often just bookkeeping entries, rather than actual investment pools, and can be wiped out in a corporate bankrup.tcy."
(Institutional Investor)
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